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Legislation alerter: Home businesses excluded from 1954 Act security of tenure

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21/01/2016

Home sweet home

Statistics confirm that home working is making an increasingly significant contribution to the UK economy [1]. Between 2009 and 2015 the UK saw the third largest rise (19%) in self-employment and home-based business in Europe. In 2015 the freelance workforce rose to a 40 year high of almost 5 million people and over 60% of new businesses were started at home. By mid-2015 there were some 3 million home businesses in the UK and, with the government publicly putting small businesses at the heart of its economic growth plan, the Small Business, Enterprise and Employment Act 2015 (SBEEA) was enacted to facilitate and continue this trend.

In particular, on 1 October 2015, sections 35 and 36 of the SBEEA came into force, inserting new section 43ZA into the Landlord and Tenant Act 1954 (LTA) so that tenants carrying on home businesses will not acquire security of tenure protection.

New freedom for landlords and tenants

Previously, landlords generally prohibited tenants from operating any business from their rented home. That was because there was a risk that the property would be occupied for business purposes and would therefore be caught by Part II of the LTA, which confers a right of lease renewal on tenants and which prevents landlords from recovering possession of their premises unless certain, limited statutory grounds can be made out. The government recognised that this was stifling the opportunity for many tenants to set up home businesses. New section 43ZA addresses this concern – home business tenancies are now specifically excluded from Part II LTA.

A home business tenancy is one under which:

  • A dwelling house [2] is let as a separate dwelling;
  • The tenant (or tenants if there are joint tenants) are individuals; and
  • The terms of the tenancy (a) require the tenant(s) to occupy the premises as a home; and (b) permit the tenants to carry on (or permit the landlord to consent to) a home business [3] (but not any other business).

WM Comment

New section 43ZA will be good news for landlords and tenants alike. Landlords will be relieved that there is no longer a risk of them inadvertently consenting to or acquiescing in a tenant’s business use at home, and security of tenure protection arising as a result. Tenants will be pleased at the new flexibility for them to operate a home business, especially as improved information and communication technology mean that this is an increasingly viable option.

In terms of the legal detail, however, this area will be one to watch. Subsection 43ZA (7) provides for the making of regulations to prescribe in more detail those businesses which are, and which are not, home businesses (as defined) and it is not yet clear whether the legislation applies to flats as well as houses. Walker Morris will monitor and report as case law in this area develops.

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[1] Sources used: Office of National Statistics, Eurostat, Ashburnham Insurance Services, LexisNexis, BIS.
[2] It is interesting that the term “house” is used in the LTA, but not defined. It is currently unclear, and indeed expert commentary is divided, as to whether flats would be caught by this legislation.
[3] A home business is a business which might reasonably be carried on at home, with certain specific exceptions, such as the sale of alcohol from the premises (section 43ZA LTA (4) – (6)).

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